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UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 36561 / December 7, 1995
ADMINISTRATIVE PROCEEDING
File No. 3-8892
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: ORDER INSTITUTING PROCEEDINGS
In the Matter of : PURSUANT TO SECTIONS
: 15(b) AND 19(h) OF THE
: SECURITIES EXCHANGE ACT OF
CHARLES E. MICHAEL, JR., : 1934, MAKING FINDINGS AND
: IMPOSING REMEDIAL SANCTIONS
Respondent. :
:
:
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I.
The Commission deems it appropriate and in the public
interest that public administrative proceedings be instituted
pursuant to Sections 15(b) and 19(h) of the Securities Exchange
Act of 1934 ("Exchange Act") against Charles E. Michael, Jr.
("Michael").
In anticipation of the institution of these administrative
proceedings, Michael has submitted an Offer of Settlement which
the Commission has determined to accept. In determining to
accept this Offer, the Commission considered Michael's
cooperation and assistance to the staff in its investigation and
litigation. Solely for the purpose of these proceedings and any
other proceeding brought by or on behalf of the Commission or to
which the Commission is a party, and without admitting or denying
the findings herein, except for those set forth in Section III A
and III B below, which Michael admits, he consents to the entry
of this Order Instituting Proceedings, Making Findings and
Imposing Remedial Sanctions.
II.
Accordingly, it is ordered that proceedings pursuant to
Sections 15(b) and 19(h) of the Exchange Act be, and hereby are,
instituted.
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III.
On the basis of this Order and the Respondent's Offer of
Settlement, the Commission makes the following findings: -[1]-
A. From 1992 to at least in or about October, 1994,
Michael was a registered representative of a broker-dealer
registered with the Commission pursuant to Section 15(b) of the
Exchange Act.
B. On November 2, 1994, the Commission filed a lawsuit
against Michael and others captioned Securities and Exchange
Commission v. Basic Energy & Affiliated Resources, Inc., et al.,
Case No. 94-CV-74434 DT, in the United States District Court for
the Eastern District of Michigan. On May 11, 1995, the court
entered a permanent injunction against Michael, with his consent
and without admitting or denying the allegations contained in the
complaint, except as to jurisdiction, enjoining him from
violating Sections 5(a), 5(c) and 17(a) of the Securities Act of
1933 and Section 10(b) of the Exchange Act and Rule 10b-5
thereunder.
C. The Commission's Complaint alleges that during the
period from at least 1992 through November 2, 1994, Basic Energy
& Affiliated Resources, Inc. (BEAR) offered and sold at least 14
unregistered oil and gas programs through a multi-level marketing
structure consisting of at least 150 marketers. The Complaint
also alleges that Michael was a top marketer for BEAR, sold BEAR
programs and developed a marketing structure below him through
which other marketers sold BEAR programs and for which they
received commissions, and that, Michael and others offered and
sold the unregistered BEAR securities to hundreds of investors
thereby raising at least $27 million. Further the Complaint
alleges that in the offer and sale of BEAR securities, Michael
made misrepresentations and omissions of material fact concerning
the risks associated with investing in BEAR programs; the
financial condition of BEAR; the use of investor funds; and the
estimated oil and gas reserves of properties leased or owned by
BEAR.
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-[1]- The findings herein are made pursuant to Respondent
Michael's Offer of Settlement and are not binding on any other
person or entity named as a respondent in this or any other
proceeding.
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IV.
In view of the foregoing, it is in the public interest to
impose the sanction specified in the Offer of Settlement.
Accordingly, IT IS HEREBY ORDERED:
That Michael be barred from associating with any broker,
dealer, investment company, investment adviser, or municipal
securities dealer, effective immediately; provided that after two
years Michael may make application to reapply to the appropriate
self-regulatory organization, or where there is none, to the
Commission.
By the Commission.
Jonathan G. Katz
Secretary